ABF Freight System Inc., the less-than-truckload (LTL) unit of ArcBest Corp., has imposed a $5.92 surcharge on each shipment moving to and from California, due mostly to higher costs of compliance with state regulations, the carrier said.
The ABF tariff surcharge, which took effect April 1, is designed to offset the cost of complying with a recent addition to the state's labor code, which, according to Eddie Sorg, ABF's vice president of yield management, "imposes significant new burdens on employers that pay employees on a piece-rate basis." Sorg's comments appeared in the "TransDigest" March newsletter published by the Transportation and Logistics Council, a group of transportation attorneys and practitioners. A spokeswoman for the Fort Smith, Ark.-based company confirmed the surcharge, but declined comment on the reasons behind it.
Piece-rate pay is broadly defined as a category of pay that is tied to units of production or activities performed. As it applies to trucking, the most common type of piece-rate payment is pay per load, whether it is calculated as a fixed fee per load or as a payment based upon the mileage associated with a particular load.
The state legislation, which went into effect January 1, requires employees to be compensated for rest and recovery periods, as well as for other "nonproductive times" that are separate from piece-rate compensation. The language does not target any industry.
In its newsletter, the Council said it was perplexed that ABF assumed the legislation applied to all shipments moving to and from California. Company drivers are normally paid by the hour, and meal and rest breaks required by federal regulations are embedded in their pay. Owner-operator drivers are generally paid by the mile or on a point-to-point basis, but even then the compensation for the mandated meal and rest breaks should already be included in the contract price, the Council said. The group also wondered how ABF arrived at the specific per-shipment surcharge of $5.92.
The ABF spokeswoman declined comment on the issue beyond saying the unit "makes pricing adjustments from time to time based on changing conditions, in order to appropriately reflect the cost of doing business in various regions."
Overland Park, Kan.-based YRC Worldwide Inc., one of ABF's chief rivals, said it is evaluating the impact of the law but has not made a decision regarding a surcharge. FedEx Freight, the LTL unit of Memphis-based FedEx Corp., said it has not implemented a surcharge. It is believed that ABF is the only carrier that's introduced a surcharge.
The interpretation of California's rules governing driver meal and rest times has become an issue on Capitol Hill. Language contained in a bill reauthorizing six years of funding for the Federal Aviation Administration would effectively pre-empt the 22 states with driver meal and rest times from imposing laws and regulations on drivers operating in interstate commerce. Supporters of the language were motivated by a 2014 9th Circuit appeals-court ruling that federal law pre-empting any state economic regulation of trucking did not apply to California's driver meal- and rest-time policies because they didn't affect a carrier's ability to compete freely on rates, routes, and services.
In the newsletter, the Council said the publication of the ABF surcharge would appear to show that the state's new regulations are impacting prices, routes, and services in California.